Monday, December 29, 2008

Investment Planning Fundamentals

Most of the people in India believe in savings. Right from the rich people to the kids who save via piggy bank to even the beggars who have bank accounts. Saving is very important habits period.

Majority of this saving is either lying with some care taker or in savings account or in piggy bank or simply lying in your godrej cupboard meaning its lying idle. Its sleeping

The important lessons to be learned is that its very good to save but the money which is saved should also be invested in right asset class. Your money should also work as hard as you work to earn that money. Money should keep growing keep multiplying.

anything not used today and saved for the future use can be considered savings.

The most important and common fundamentals of investment planning are
1) Start saving and investing early
2) Invest Regularly
3) Ensure higher returns with calculated risk management

(Investment of Rs 1000 per month invested in assets which gives 8% , 12%, 15% for 25 years will become 9.5 lacs, 18.78 lacs and 32.43 lacs respectively)
so two person with same amount of savings for 25 years one will end up with Rs 9.5 lacs and the other may end up with Rs 32 lacs. so one can be richer by (32.5 - 9.5 = 23 lacs) by simply changing your decision in right selection of asset class and risk management.

Mr Antulay investing Rs 5000 per month in PPF for a return of 8% compounded and Mr Bhanusali investing same amount Rs 5000 per month in ELSS which has given average return of 15% .
After 30 years
Mr Antulay had = 74.5 lacs
Mr Bhanusali had = 3.46 crores
While safety of capital is important but also taking risk in calculated and planned manner can give you huge returns.

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